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Blackstone to pay $3.45B for lab offices; US logistics portfolio sells for $875M

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Six trends shaping the industries and sectors we cover in 2021


Blackstone to pay $3.45B for lab offices; US logistics portfolio sells for $875M

Note to subscribers: The Week in Real Estate will not publish on Dec. 25 or Jan. 1. Your next issue will be dated Jan. 8, 2021.

S&P Global Market Intelligence offers our top picks of real estate news stories and more published throughout the week.

The COVID-19 pandemic caused the most challenging period in the history of the hotel real estate investment trust sector, and investors will be watching to see whether business travel begins to rebound in the late first half of 2021, Stifel analyst Simon Yarmak wrote in a Dec. 16 note.

Lodging REITs have posted a total return of negative 27.2% for 2020 so far, compared to negative 10.6% for the MSCI US REIT Index, but the sector benefited from the beginning of vaccine rollouts in recent weeks, Yarmak wrote, adding that distressed properties are likely to begin coming to market in the first half of 2021.

Group travel, a key driver of business at large hotels, is unlikely to return in a meaningful way until September 2021, Yarmak wrote. Yet, he added, "we feel numbers for 2022, and beyond, are substantially more important to investors."

For 2022, analysts' estimates have drifted lower, but Yarmak argued there is "significant pent-up demand for all the major segments," which should drive better-than-expected performance that year.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Portfolio plays

* An affiliate of private equity and real estate giant The Blackstone Group Inc. agreed to acquire a portfolio of laboratory office properties from a real estate fund of Brookfield Asset Management Inc. for $3.45 billion. The portfolio totals 2.3 million square feet, with about 90% of the portfolio in Cambridge, Mass.

* AXA Investment Managers - Real Assets bought a 27-property logistics portfolio encompassing about 7,984,000 square feet across the U.S. on behalf of clients for $875 million via a share purchase of a REIT that was previously managed by Cabot Properties Inc.

The pandemic effects

* The negative impact of the pandemic continued to show on commercial real estate deal activity in the U.S. in November, with the monthly transaction volume falling 57% year over year to about $20.8 billion. Year-to-date through November, deal volume was 40% lower than a year ago, with conditions expected to get "much worse," according to Real Capital Analytics.

* Marriott International Inc. will permanently dismiss 850 employees at its New York Marriott Marquis hotel on March 12, 2021, The Wall Street Journal reported, citing a company spokeswoman. The hospitality giant had already furloughed over 1,200 workers at the hotel in March as surging coronavirus infections triggered lockdowns.

* Regional mall REIT Simon Property Group Inc. reinstated the annual base salaries of certain executives that were slashed in March due to the impact of the pandemic. The reinstatement will be effective Dec. 19.

Dialogues

* Self-storage REIT Public Storage said it "will continue to take decisive action to drive sustainable value creation" in response to the recent calls for a board overhaul and claims of the REIT's underperformance by activist shareholder Elliott Management Corp.

* Regional mall landlord Washington Prime Group Inc. is in discussions with certain of its debt holders for potential strategic or capital markets transactions, including a potential private exchange offer to convert about $259.3 million of unsecured bonds into $175 million of preferred equity investment. The company said it had not reached any agreement with the debt holders as of Dec. 15.

Strategic moves

* Blackstone crossed the $20 billion-mark in nontraded REIT fundraising in November, according to the investment banking firm Robert A. Stanger & Co. Inc. As of November-end, the private equity giant had raised $20.36 billion via Blackstone Real Estate Income Trust Inc. since its launch in 2017.

* Healthcare landlord Welltower Inc. formed a $550 million joint venture with certain vehicles managed by Wafra Inc. comprising 24 medical office properties. The alternative investment firm's platforms will own 80% of the venture and the REIT will retain the remaining 20%, in addition to continuing to serve as asset manager and operator.

* Multifamily landlord Apartment Investment & Management Co., separated its businesses and created two separate publicly traded companies, Apartment Income REIT Corp. and Aimco.

Around the world

* Swedish property company Samhällsbyggnadsbolaget i Norden AB (publ), or SBB, which backed out of its offer to acquire Norwegian peer Entra ASA earlier in December, could now revive and even sweeten its offer after certain Entra shareholders said they "see merit" in SBB's offer. SBB said it has been approached by certain Entra shareholders that support SBB completing its due diligence on Entra.

* The U.K.-based industrial landlord Segro PLC intends to launch a simplified mandatory offer to buy the shares that it does not already own in Sofibus Patrimoine S.A., in deals that will value the France-based urban warehouse company at €238.5 million.

* Niam AB agreed to sell a Danish residential portfolio, including HD Ejendomme A/S, for 12.1 billion Danish kroner to Heimstaden AB (publ) unit Heimstaden Bostad AB (publ). The portfolio comprises 152 residential properties with 6,237 units totaling 594,400 square meters, 35 commercial properties totaling 182,700 square meters, and nine land plots with a development potential of 73,600 square meters.

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